ECB Is Watching Oil for Inflation Risks, Lagarde Tells Ministers

(Bloomberg) — The European Central Bank is watching the oil price for any inflationary impact from the Israel-Hamas conflict, President Christine Lagarde told euro-area finance ministers, according to people familiar with the matter.

Lagarde spoke at a closed-door meeting of the bloc’s officials on Monday in Luxembourg, said the people, speaking on condition of anonymity. An ECB spokesman declined to comment.

The outbreak of the Hamas-Israel war was met with a muted response in markets, though some analysts say that an escalation could push oil to $100 a barrel. The ECB’s September inflation forecast — which predicts consumer-price growth will slow to 2% in 2025 — is based on an estimate of an oil price of $82.7 per barrel this year dropping to $77.9 in 2025.

The risk of rising oil prices would hit both Europe and the US, Lagarde told the meeting, which also was attended by US Treasury Secretary Janet Yellen.

Fellow Governing Council member Francois Villeroy de Galhau highlighted last week that policymakers were vigilant on the issue, but there’s still a clear downtrend in inflation and the key point is whether the conflict would expand.

–With assistance from William Horobin, Alessandra Migliaccio, Kamil Kowalcze and John Ainger.

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